SunPower CEO says cheapest panels no longer best in solar market

Chinese solar manufacturers are still trying to sell panels at the lowest prices and have failed to adapt to an industry seeking more efficient components, said SunPower (SPWRA) Chief Executive Officer Tom Werner.

Prices for panels have plunged, and now make up less than half the cost of a system, Werner said in an interview Tuesday at Bloomberg's offices in New York. Customers are no longer seeking the cheapest solar panels, they want the cheapest solar energy.

"Most solar companies compete on price," he said. San Jose-based SunPower, the second-largest U.S. solar manufacturer, has "transitioned to selling energy."

SunPower CEO Tom Werner addresses the crowd during a press conference announcing a partnership between Ford and SunPower at the historic Ford Building in Richmond, Calif. Wednesday, August 10, 2011. (Kristopher Skinner/Staff)
(KRISTOPHER SKINNER)

Chinese producers have been accused of selling panels in the U.S. and Europe below their production costs. Offering ever- lower prices has become a money-losing strategy for most solar companies, Werner said. All of the China-based manufacturers in the 17-member Bloomberg Industries Global Large Solar Energy Index are expected to report losses this year.

SunPower focuses on delivering the most efficient panels in the industry. That lets customers produce electricity at lower prices, and makes his products more appealing, Werner said. The company said in May it may post a profit this year, its first since 2010, on sales of $2.6 billion to $2.7 billion, up from $2.42 billion last year.

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Expenses including labor and customer acquisition make up a greater portion of the cost of solar systems. Spending less on photovoltaic components won't have much affect on the bottom line, Werner said.

SunPower's panels use cells that convert 23 percent of the energy in sunlight into electricity and the company expects to reach 25 percent in "a few years," Werner said. Yingli Green Energy Holding, the world's largest panel maker by shipments last year, sells panels with efficiency rates as high as 15.4 percent.

"We'll introduce a 24 percent efficient cell in approximately two to three years," he said. Higher efficiency "allows you to produce more energy over time."

That's important for SunPower customers like Warren Buffett's MidAmerican Energy Holdings, which acquired its 579-megawatt Antelope Valley project in January.

SunPower typically charges more for its panels and Werner said the higher efficiency justifies the price tag. "You pay a premium, but you're not paying too much," he said.

Panel prices make up about 20 percent to 25 percent of the cost of a solar system, compared with as much as 70 percent in 2010 and 2011, Ben Kallo, an analyst for Robert W. Baird & Co. in San Francisco, said today in an interview.

That means companies like Yingli are facing headwinds compared to rivals like SunPower and First Solar that have done a better job of expanding into building and selling power projects, Kallo said.

The low-cost producers are "in a rough spot," he said. "The extra few cents a watt at this level are not a differentiator when choosing panels."

SunPower expects to see more consolidation and more failures among Chinese producers, Werner said. The main unit of Suntech Power Holdings Co., the largest panel maker in 2011, was pulled into bankruptcy proceedings in March after missing a bond payment.

"The Chinese economy has decided that loaning money to companies that lose money is a bad idea," Werner said.